Real estate

Property insurance: what the policy covers and what it doesn't

3 November 2026 / Regent Split

Summary

Property insurance pays for the damage you suffered due to an insured event, up to the amount of actual damage and up to the agreed insured sum. What is covered is determined by the policy and the general and special insurance conditions, and the law excludes damage that you caused intentionally. If the property is insured for an amount less than its value, the payout is proportionally reduced. Before signing, report all circumstances important for risk assessment, and after damage, notify the insurer within three days.

Key facts

The payment cannot exceed the actual damage, even with a higher sum insured.
General and special conditions are part of the contract, and in case of disagreement, the policy prevails.
Underinsurance proportionally reduces the payout.
Damage must be reported to the insurer within three days.
Intentionally caused damage is not covered.
Upon sale of the property, the insurance transfers to the buyer, unless otherwise agreed.

Property insurance is a contract whose content is often checked only after damage has already occurred, and by then it is too late for corrections. It is better to read it in advance and know what you can expect from it.

The text relies on the provisions regarding insurance contracts in the Obligations Act (NN 35/05, with later amendments). The Act defines rules that apply to every policy, while the details of coverage and exclusions depend on your contract. The Act changes periodically, so on the day of signing, check the current text.

Property Insurance: Who Enters into it and What it Protects

A property insurance contract can be concluded by any person who has a legitimate interest in the insured object, and it can also be concluded for the benefit of such a person (Article 948 of the Obligations Act). The insured is the one who would avoid a material loss without the insured event, usually the owner. The Act requires that this interest is legally permissible and that it exists at the moment the insured event occurs, and not just on the day the policy is signed.

Three roles should be distinguished. The policyholder pays the premium, the insured suffers the damage, and the insurer pays the insurance indemnity, i.e., compensation for damage. Insurance serves to compensate for damage that the insured would suffer to their property (Article 949). What is exactly covered is stated in the policy. It must specify the object of insurance, the insured risk, the duration and period of coverage, the sum insured, and the premium (Article 926). General and special terms are an integral part of the contract, and the insurer must inform you of this and provide you with their text if they are not printed on the policy. When a provision of the terms and a provision of the policy do not agree, the one from the policy applies.

Professional tip: Request the general and special terms before signing and read them as part of the contract. The Act equates them with the policy, and in case of disagreement, the text of the policy takes precedence.

What the Policy Covers and What it Excludes

The Act does not provide a list of perils such as fire, flood, or earthquake. The insured risk is determined by the contract, and the Act sets the framework (Article 922): the risk must be future, uncertain, and independent of the exclusive will of the policyholder or the insured. The contract is void if, at the time of its conclusion, the insured event had already occurred or it was certain that it would occur.

Within this framework, the insurer compensates for damages caused accidentally or by the fault of the policyholder, the insured, or the beneficiary, unless the contract has expressly excluded them (Article 953). Damage intentionally caused by these persons is not covered, and a contrary contractual provision has no legal effect (Articles 944 and 953). However, the insurer does compensate for damage caused by a person for whose actions the insured is responsible, regardless of whether they acted intentionally or negligently. In three cases, the Act starts from exclusions, and the contract can change this: damage originating from defects of the thing itself (Article 954), damage from war operations and rebellions (Article 955), and loss of profit, for example, lost rent, which is taken into account only if agreed upon (Article 949, paragraph 5).

Professional tip: For every peril that concerns you, such as flood or earthquake, check if it is explicitly named in the policy and if there is a specific exclusion in the terms. Do not assume it is covered.

How Much the Insurer Pays: Actual Damage and Underinsurance

The insurance indemnity cannot be greater than the damage you have suffered (Article 949, paragraph 2). The sum insured sets the upper limit but does not guarantee payment in that amount. The contract can also limit compensation to an amount less than the damage (Article 949, paragraph 4). If the value of the thing is mutually agreed upon in the contract, the insurance indemnity is determined according to it (Article 949, paragraph 7). Multiple consecutive damages in the same insurance period are each paid in full, without reduction for earlier payments (Article 949, paragraph 6).

Underinsurance is easily overlooked. If the value of the thing at the time of damage is greater than the sum insured, the insurance indemnity is proportionally reduced (Article 960, paragraph 1). Example calculation, unrelated to market prices: an apartment worth 200,000 euros is insured for 100,000 euros, and the damage amounts to 40,000 euros. The sum insured covers half of the value, so the payment is proportionally reduced to 20,000 euros. An exception exists if it is agreed that the relationship between the value and the sum insured is not important for the calculation (Article 960, paragraph 2).

The opposite rule applies to an excessive sum. If a sum greater than the value of the thing is agreed upon, and no one acted in bad faith, the sum and premium are reduced to the actual value (Article 956, paragraph 3). If the value of the thing decreases during insurance, each party can request a reduction of the sum and premium (Article 957).

Professional tip: Ask the insurer how they determine the value of the thing and if an agreed value is stated in the policy. Compare the sum insured with that value before each renewal.

Declarations, Premium, and Duration: What is Required of You

When concluding the contract, you must declare all circumstances important for risk assessment that are known to you or could not have remained unknown to you (Article 931). An intentionally inaccurate declaration or concealment allows the insurer to request the annulment of the contract (Article 932). Unintentional inaccuracy gives the insurer the right to terminate the contract or propose a higher premium within one month, and if damage occurs before that, the compensation is proportionally reduced (Article 933).

During the insurance period, you must inform the insurer of every change in circumstances that may be significant for risk assessment: without delay if you increased the risk yourself, and within 14 days of knowledge if it increased without your involvement (Article 938). If the risk decreases, you can request a lower premium (Article 940).

The premium is paid within the agreed terms. If you fail to pay a due premium, the contract terminates by law only after 30 days have passed since the insurer delivered a registered letter, and this period cannot expire before 30 days have passed since the due date (Article 937). The contract also terminates if the premium has not been paid within one year from its due date.

Professional tip: Record every major change to the property or its use and ask the insurer in writing if it needs to be declared. Keep the answer with your policy.

When Damage Occurs: Deadlines and Obligations After the Insured Event

You must inform the insurer of the insured event within three days of learning about it at the latest (Article 941). If you miss the deadline, you are liable for the damage the insurer incurs as a result, but contractual provisions regarding the loss of the right to insurance indemnity due to non-fulfillment of obligations after the insured event are void (Article 942).

You are obliged to take reasonable measures to prevent damage and to limit its consequences (Article 950). The insurer compensates for the costs of such attempts even when they were unsuccessful, and even when they, together with the damage, exceed the sum insured, if you acted reasonably or at their instruction. If you fail to undertake salvage without justification, the insurer's obligation is reduced by the amount by which the damage is greater due to this failure.

The payment deadline is determined by the contract and cannot exceed 14 days from the notification of the insured event. If more time is needed to determine the obligation or amount, the insurer must pay the insurance indemnity or respond that the claim is unfounded within 30 days of the claim for damages. The undisputed part is paid as an advance, and delay incurs default interest (Article 943). After payment, rights against the person responsible for the damage transfer to the insurer up to the amount paid (Article 963). You cannot surrender the damaged item to the insurer and demand the full sum insured, unless it is agreed upon (Article 951).

Professional tip: Report the damage in writing and keep proof of the sending date, photos of the damage, and invoices for all salvage costs.

Sale, Mortgage, and Multiple Policies: Who Owns the Insurance

When you sell a property, the rights and obligations from the insurance legally transfer to the buyer, unless otherwise agreed (Article 961). If you do not inform the insurer of the sale, you still owe premiums that become due after the sale. The insurer and the buyer can withdraw from the insurance with a 15-day notice period, and they must give notice no later than 30 days from learning about the sale.

A mortgage changes who receives the money. After an insured event, the liens on the property transfer to the due compensation, and the insurer cannot pay the insured without the consent of the holders of these rights, for example, the bank. They can demand payment directly from the insurer within the limits of the sum insured (Article 962). More about lien rights is in the article Lien and Mortgage: What They Mean for a Real Estate Buyer.

If you insure the same property with multiple insurers, and the sum of insured amounts exceeds its value (double insurance), all policies are valid if you did not act in bad faith, but you cannot collectively receive more than the damage. After damage, you must inform each insurer about the other policies (Article 958).

Professional tip: Before selling, inform the insurer in writing and agree with the buyer from which day they take over the policy. If the property is encumbered by a mortgage, check what the loan agreement requires regarding the policy.

How Regent Can Help You

Regent mediates in the purchase, sale, and rental of residential and commercial properties, as well as new builds throughout Croatia, helps buyers find a property that suits their needs, and works with foreign buyers. Before any payment, it helps verify the legal status of the property, including the situation in the land registry and encumbrances. For aspects it does not handle, such as legal interpretation of contracts or tax matters, it refers to a lawyer, public notary, or tax advisor.

If you are buying or selling, contact us via the Contact page or check the Sale page.

Frequently Asked Questions (FAQ)

Can the insurer refuse payment if I cause the damage myself?
Yes, if you caused the damage intentionally or by fraud (Articles 944 and 953). For damage caused accidentally or by your fault, the insurer is liable, unless the contract has expressly excluded it.

How many days does the insurer have to pay the insurance indemnity?
The deadline is determined by the contract and cannot exceed 14 days from the notification of the insured event. If more time is needed to determine the obligation or amount, the insurer must pay or respond that the claim is unfounded within 30 days of the claim for damages (Article 943). The undisputed part is paid as an advance.

What if I insured the property for less than its value?
The payment is proportionally reduced, as this is underinsurance (Article 960). It is not reduced only if it is agreed that the relationship between the value and the sum insured is not important for the calculation.

Does the policy transfer to the buyer when I sell an apartment?
Yes, unless otherwise agreed, the rights and obligations from the insurance legally transfer to the buyer. If you do not inform the insurer of the sale, you still owe premiums that become due after it, and the insurer and the buyer can withdraw with a 15-day notice period (Article 961).

Can I have two policies for the same property?
You can, if you do not act in bad faith, but the total compensation cannot exceed the damage. After damage, you must inform each insurer about the other policies (Article 958).

Who receives payment if the property is mortgaged?
The insurer may not pay the insured without the consent of the lien holder, for example, the bank, and the holder can demand payment directly from the insurer within the limits of the sum insured (Article 962).